IDEAS home Printed from https://ideas.repec.org/p/hal/cesptp/hal-04011018.html
   My bibliography  Save this paper

The curse of antitrust facing bilateral monopoly: Is regulation hopeless?

Author

Listed:
  • Andrey Shastitko

    (MSU - Lomonosov Moscow State University = Université d'État Lomonossov de Moscou [Moscou])

  • Claude Ménard

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - École d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne)

  • Natalia Pavlova

    (MSU - Lomonosov Moscow State University = Université d'État Lomonossov de Moscou [Moscou])

Abstract

This paper is about the challenges that antitrust authorities face when dealing with bilateral monopolies. The curse of antitrust refers to traps threatening the efficient applicability of antitrust policies in these situations. Standard theories diverge about the attainability of equilibrium under bilateral monopolies but share skepticism about its efficiency if it ever exists. We suggest a different approach, based on transaction cost theory. First, since bilateral monopolies often develop in the upper segment of value chains, misalignment between parties may generate negative externalities. Second, if parties reach an agreement, the impact of the governance mechanism implemented must be assessed beyond the usual parameters of prices and quantities. Indeed, the risk of negative externalities in the absence of appropriate governance increases dramatically when "critical transactions" are at stake. With vertical integration prohibited, second-best alternatives in which antitrust authorities leave room for innovative hybrid governance may allow internalizing externalities while avoiding high switching costs.

Suggested Citation

  • Andrey Shastitko & Claude Ménard & Natalia Pavlova, 2018. "The curse of antitrust facing bilateral monopoly: Is regulation hopeless?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04011018, HAL.
    • Handle: RePEc:hal:cesptp:hal-04011018
    DOI: 10.3897/j.ruje.4.27031
    Note: View the original document on HAL open archive server: https://paris1.hal.science/hal-04011018v1
    as

    Download full text from publisher

    File URL: https://paris1.hal.science/hal-04011018v1/document
    Download Restriction: no
    File URL: https://libkey.io/10.3897/j.ruje.4.27031?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ronald H. Coase, 2025. "The Institutional Structure of Production," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, edition 0, chapter 3, pages 37-46, Springer.
    2. Zerbe, Richard Jr. & Bauman, Yoram & Finkle, Aaron, 2006. "An aggregate measure for benefit-cost analysis," Ecological Economics, Elsevier, vol. 58(3), pages 449-461, June.
    3. Geoffrey A. Manne & Joshua D. Wright, 2010. "Innovation And The Limits Of Antitrust," Journal of Competition Law and Economics, Oxford University Press, vol. 6(1), pages 153-202.
    4. repec:rnp:ecopol:10611 is not listed on IDEAS
    5. repec:rnp:ecopol:ep1219 is not listed on IDEAS
    6. A. Shastitko., 2016. "On the methodology of institutional studies," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 8.
    7. A. Shastitko & N. Pavlova., 2017. "Antitrust in bilateral monopoly," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 8.
    8. Anast. Shastitko., 2017. "Companies’ interaction in the markets of joint products in the context of the antitrust law enforcement," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 6.
    9. repec:rnp:ecopol:ep1236 is not listed on IDEAS
    10. Roger Blair & Christina DePasquale, 2011. "Considerations of Countervailing Power," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(1), pages 137-143, August.
    11. Blair, Roger D & Kaserman, David L, 1987. "A Note on Bilateral Monopoly and Formula Price Contracts," American Economic Review, American Economic Association, vol. 77(3), pages 460-463, June.
    12. Paul L. Joskow, 2002. "Transaction Cost Economics, Antitrust Rules, and Remedies," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(1), pages 95-116, April.
    13. Shastitko, A. & Pavlova, N., 2017. "Bargaining Power and Market Power: Comparison and Policy Implications," Journal of the New Economic Association, New Economic Association, vol. 34(2), pages 39-57.
    14. Avdasheva, Svetlana & Kryuchkova, Polina, 2015. "The ‘reactive’ model of antitrust enforcement: When private interests dictate enforcement actions – The Russian case," International Review of Law and Economics, Elsevier, vol. 43(C), pages 200-208.
    15. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shastitko, Andrey Ye. (Шаститко, Андрей) & Pavlova, Natalia S. (Павлова, Наталья), 2018. "Wide Prospects and Ravines of Competition Policy [Широкие Перспективы И Овраги Конкурентной Политики]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 110-133, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Richard J. Mccann, 1996. "Environmental Commodities Markets: ‘Messy’ Versus ‘Ideal’ Worlds," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 85-97, July.
    2. Peter Maskell & Mark Lorenzen, 2004. "The Cluster as Market Organisation," Urban Studies, Urban Studies Journal Limited, vol. 41(5-6), pages 991-1009, May.
    3. repec:rnp:ecopol:ep1512 is not listed on IDEAS
    4. Williamson, Oliver E., 2010. "Transaction Cost Economics: The Natural Progression," Journal of Retailing, Elsevier, vol. 86(3), pages 215-226.
    5. Marco Furlotti, 2007. "There is more to contracts than incompleteness: a review and assessment of empirical research on inter-firm contract design," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 11(1), pages 61-99, March.
    6. Ciccotello, Conrad S. & Hornyak, Martin J., 2000. "Cooperation via contract: An analysis of research and development agreements," Journal of Corporate Finance, Elsevier, vol. 6(1), pages 1-24, March.
    7. Diane Dawson & Maria Goddard, 1999. "Long‐term contracts in the NHS: a solution in search of a problem?," Health Economics, John Wiley & Sons, Ltd., vol. 8(8), pages 709-720, December.
    8. Lars Sorgard & Andreea Cosnita-Langlais, 2013. "Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare?," Post-Print hal-01668416, HAL.
    9. Schmid, Andreas, 2007. "Incentive Compatibility and Efficiency in the contractual Insurer-Provider Relationship: Economic Theory and practical Implications: The Case of North Carolina," MPRA Paper 23311, University Library of Munich, Germany, revised 2008.
    10. Eekhoff, Tholen, 2005. "Zur Wahl der optimalen Organisationsform betrieblicher Zusammenarbeit: Eine gesamtwirtschaftliche Perspektive," Arbeitspapiere 51, University of Münster, Institute for Cooperatives.
    11. Hsuan-Yu Lin & Chih-Hai Yang, 2016. "Uncertainty, specific investment, and contract duration: evidence from the MLB player market," Empirical Economics, Springer, vol. 50(3), pages 1009-1028, May.
    12. John M. de Figueiredo & Brian S. Silverman, 2017. "On the Genesis of Interfirm Relational Contracts," Strategy Science, INFORMS, vol. 2(4), pages 234-245, December.
    13. Kim, Jongwook & Mahoney, Joseph T., 2008. "A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach," Working Papers 08-0108, University of Illinois at Urbana-Champaign, College of Business.
    14. Gonzalez, P., 1999. "Specific Investment, Absence of Commitment and Observability," Papers 99-03, Laval - Recherche en Energie.
    15. Williamson, Oliver E., 1996. "Transaction cost economics and the Carnegie connection," Journal of Economic Behavior & Organization, Elsevier, vol. 31(2), pages 149-155, November.
    16. Banterle, Alessandro & Stranieri, Stefanella, 2008. "The consequences of voluntary traceability system for supply chain relationships. An application of transaction cost economics," Food Policy, Elsevier, vol. 33(6), pages 560-569, December.
    17. Wiser, R. H., 2000. "The role of public policy in emerging green power markets: an analysis of marketer preferences," Renewable and Sustainable Energy Reviews, Elsevier, vol. 4(2), pages 177-212, June.
    18. repec:ebl:ecbull:v:3:y:2007:i:68:p:1-7 is not listed on IDEAS
    19. repec:wsi:acsxxx:v:21:y:2019:i:08:n:s1363919619500130 is not listed on IDEAS
    20. de Bragança, Gabriel Godofredo Fiuza & Daglish, Toby, 2017. "Investing in vertical integration: electricity retail market participation," Energy Economics, Elsevier, vol. 67(C), pages 355-365.
    21. Ludwig van den Hauwe, 2005. "Public Choice, Constitutional Political Economy and Law and Economics," Method and Hist of Econ Thought 0508001, University Library of Munich, Germany, revised 09 Aug 2005.
    22. Biondi Yuri, 2017. "The Firm as an Enterprise Entity and the Tax Avoidance Conundrum: Perspectives from Accounting Theory and Policy," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 7(1), pages 1-9, April.
    23. Luc Baumstark & Claude Ménard & William Roy & Anne Yvrande-Billon, 2005. "Modes de gestion et efficience des opérateurs dans le secteur des transports urbains de personnes," Post-Print halshs-00103116, HAL.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:hal-04011018. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.